In our work at PASG, we examine enterprise software market dynamics and the ability of companies to compete effectively given their solutions’ positioning, leadership and development teams, channel partners and other capabilities. We frequently encounter Amazon Web Services (AWS) – though, until recently, we’ve most often seen them as a vendor to a software company. In this capacity, AWS is providing Infrastructure as a Service (IaaS) or Platform as a Service (PaaS) capabilities such as compute, storage or content delivery networking. These roles are core to AWS’ heritage, fulfill the insatiable demand in modern computing for cloud services, and enable a software company to deliver a cloud-based enterprise application to its end customer.1
However, Amazon isn’t limiting itself to infrastructure and platform services anymore. Following the examples of other major technology companies that have built market-leading positions with both platform and enterprise application offerings (e.g., Salesforce, Microsoft), Amazon is moving “up-stack” and is now offering multiple applications, too:
- AWS Connect is a cloud-based, multi-channel contact center with rich capabilities;
- AWS Pinpoint is a feature rich multichannel marketing automation system;
- AWS Chime is a unified communications and collaboration solution;
- AWS CloudSearch is an intelligent enterprise search solution that delivers foundational search and discovery capabilities across EC2 and other data sources; and
- AWS QuickSight is a business analytics service providing analysis, visualization and insight generation.
These are quality applications that are building market traction with enterprise buyers. AWS Connect has won accounts vs. incumbent Avaya; Pinpoint is evaluated in the same set as Marketo; and Chime is competing well with Skype for Business (fka Lync and now branded Teams). Looking forward, there is no published roadmap indicating the next enterprise application AWS is likely to launch, but the heft of analytics and machine learning services they’ve added in recent years exemplifies their capability. Our question is, what might be on their roadmap?
First, with Connect and Pinpoint already in the market, CRM and Sales Automation applications are logical additions as immediate adjacencies to contact center and marketing automation, and they share overlapping buyer groups across the enterprise. Second, a Knowledge Management application (KM) is also likely because KM is frequently deployed alongside contact center applications, and an AWS KM could be built leveraging search functionality already available in AWS CloudSearch. Third, combining AWS’ various machine learning and business analytics capabilities could yield a differentiated BI solution.
If Amazon enters these application markets, yes they’ll face incumbent vendors, but as an infrastructure services provider they have advantage as well. Each new solution brings more compute, data and storage onto the AWS platform creating a home court advantage for Amazon when a customer evaluates competing solutions. For example, if Amazon runs the application database underlying your Enterprise Resource Planning application, then having Amazon provide your CRM allows easy integration to that database when required, and if that’s true, then shouldn’t your contact center be where your CRM is?
For enterprise application software companies and their investors, Amazon’s evolution may bring additional competition to your market in coming years. Competing effectively with Amazon will require a focused approach. Helpful tactics we’ve observed and recommend include:
- Tailor to serve specialized customer segments – Similar to Microsoft, who over time expanded to build applications for its operating system platforms and compete with Windows ecosystem partners, an infrastructure vendor will build initial solutions that solve base needs for the majority / largest market shares, not the specialized needs of specific segments. So software vendors with specific foci, e.g., serving regulated industries like healthcare and finance, are likely to encounter less competitive pressure should Amazon organically (meaning not via acquiring an existing vendor) enter their application market.
- Own solution selling and delivery – Excel beyond vendors who rely on partners to complete their solution as AWS does; instead be responsible end-to-end for solution customization, installation, operation and maintenance. With this approach you achieve a direct customer relationship and dialog that can be used to strengthen life time customer value, enrich brand loyalty and gather customer inputs to your product roadmap.
- Focus your product roadmap on high value add, differentiated features – Core feature requirements, especially in mature application segments (e.g., CRM) will quickly be commoditized; invest in a strategic product roadmap built using solid market research methods and customer feedback to deliver unique capabilities customers want and can easily understand as valuable.
While AWS continues to expand offerings in IaaS and PaaS, we believe we’ll also see them release more enterprise applications. Enterprise application software vendors and their shareholders should proactively be asking whether AWS could enter their market, why/why not, and how to prepare to successfully compete against such a capable entrant.
1. Gartner Oct. 2017 worldwide forecast for IaaS to grow 23.3% annually from $35B in 2017 to $72B in 2020, and PaaS to grow 18.2% annually from $11B in 2017 to $21B in 2020.
